How much does Borrower A owe in points for securing a mortgage on a $390,000 property with an LTV of 80% and 2.5 points?

To determine how much Borrower A owes in points for securing a mortgage, it is essential to understand how points work in the context of a mortgage. Points are typically fees paid to the lender at closing, with one point equating to 1% of the loan amount.

In this scenario, the property value is $390,000, and the loan-to-value (LTV) ratio is 80%. To calculate the loan amount, you multiply the property value by the LTV ratio:

Loan Amount = Property Value x LTV Loan Amount = $390,000 x 0.80 Loan Amount = $312,000

Next, we need to calculate the cost of the points. With 2.5 points charged on the loan amount, the calculation is as follows:

Cost of Points = Loan Amount x Points Percentage Cost of Points = $312,000 x 0.025 (which is the decimal form of 2.5%) Cost of Points = $7,800

Thus, Borrower A owes $7,800 in points for securing the mortgage.

This amount reflects the correct calculation based on the loan amount resulting from the LTV ratio applied to the property's value multiplied by the points charged, making it